The Relationship Between Earning Volatility And The Dividend Payout Of Firms Listed At The Nairobi Securities Exchange

Abstract

This study was on the relationship between earnings volatility and dividend payout of firms listed at the NSE market. The research objective was to assess the nature of relationship between earnings volatility and divided payout of the listed firms at the NSE market. The results will assist in the understanding of how earning volatility influence a firm’s dividend payout. Firms can then make use of such information to implement a dividend payout which satisfies its shareholders expectation. The firm will also ensure that the dividend payout implemented is not negatively affected by the volatility of its earnings since a decline in dividend payout for shareholders can be interpreted in terms of worse times ahead for such a firm. The research was based on the firms consistently listed at the NSE for the five years’ period from 2008 to 2012 inclusive. Data on listed firms is readily available and regarded credible for use. Thirty nine firms were used in the analysis upon which regression analysis and the SPSS analytical software were used to analyze the data. The research found that there was no significant relationship between earnings volatility and dividend payout. Dividend payout and earnings volatility were also found to vary in the different years under study. Earnings volatility was therefore one of the factors that influenced the dividend payout of a firm though not significantly and thus further research is therefore necessary to establish the specific factors that influence the dividend payout of a firm. It is also necessary to undertake research on the firms not listed at the NSE market in order to ascertain the relationship of the two variables among firms not listed at the NSE market.